How Do I Figure My Tax Home If I Spend Time In Different Countries Overseas?

“We are retired and plan to leave the United States, but currently don’t have any plans to acquire residence in another country. Our intention is to spend time in different countries in Europe and South America. (Maybe eventually we’ll decide to stay in one place, but not soon.)

“Given that we won’t be residents of any one country, is it difficult to prove that our ‘tax home’ is outside the United States? We don’t want to be required to buy U.S. health insurance under the A.C.A. (Obamacare), and my understanding is that those with a tax home outside the U.S. are exempt from this requirement.”

—Rich A., United States

Perpetual Traveler Paul Terhorst responds:

“Your best bet would be to limit visits to the United States to fewer than 30 days a year.

“The IRS uses two tests to decide whether taxpayers might qualify for the foreign earned income exclusion (FEIE). You qualify under the first, the physical presence test, if you spend fewer than 30 days in the United States per year. You qualify under the second, the bonafide resident test, if facts and circumstances show you live in another country.

“You need to qualify on one or the other, not both. Most advisers prefer you qualify under the 30-day rule because it’s a simpler, either/or test.”

“Obamacare has yet to decide what makes for an overseas resident or tax home abroad. Presumably the IRS’s two current tests make for a good starting point.”

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